You are not liable for taxes on the inherited value of stocks you receive from someone who died. The estate of the deceased person takes care of any tax issues, and once you have received stock as part of an inheritance, the stock is yours without any taxes due.

However, you can become liable for taxes if you sell your inherited shares. Capital gains taxes are paid on investment profits. A capital gain is earned when an investment is sold for more its cost of purchase.

The capital gains tax is applied only to the gain -- the difference between the cost and the selling price. In investment and tax terms, the price paid for an investment is called the cost basis. When you inherit stock, the cost basis on the shares changes. Instead of using the cost that the former owner -- the decedent -- paid, your cost basis is the share value on the date the former owner died.

This "step up" in cost basis can be a tremendous advantage if the shares were purchased at a low price and have increased significantly in value. You do not have a taxable capital gain or loss until you sell your inherited shares and have a realized value from which to calculate whether you made a profit.

If you sell the stock for more than your stepped-up basis, you have a gain equal to the sale price minus the basis. If you sell it for less than your inherited basis, the result is a capital loss, which you can use as a tax write-off against other investment gains or other income.

Tax Basis for Selling Inherited Stock - Budgeting Money

You report a capital gain or loss on your income tax return for the year the inherited stock was sold. If the decedent's estate executor filed an estate tax return, use the value of shares reported on the tax return as your cost basis for the inherited stock. If no estate tax return was filed, you can find the stock's closing price on the date of death through historical share price information on Yahoo Finance and Google Finance.

Gains from the sale of inherited stock are classified as long-term capital gains, even if you sell the shares shortly after obtaining them. The tax rate for long-term gains is lower than the rate on short-term gains or your regular income tax rate. Tim Plaehn has been best way make money gta online financial, investment and trading articles and blogs since His work has appeared online at Seeking Alpha, Marketwatch.

Plaehn has a bachelor's degree in mathematics from the U. Each week, Zack's e-newsletter will address topics such as retirement, savings, loans, mortgages, tax and investment strategies, and more. At the center of everything we do is a strong commitment to independent research and sharing its profitable discoveries with selling inherited stock at a loss. This dedication to giving investors a trading advantage led to the creation of our proven Zacks Rank stock-rating system.

These returns cover a period from and were examined and attested by Baker Tilly, an independent accounting firm.

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Visit performance for information about the performance numbers displayed above. Skip to main content. When Does Inherited Stock Become Taxable? More Articles How to Pay Capital Gains Selling Inherited Forex world market trading hours How to Sell Inherited Stocks Taxes on Stocks After a Death Are Inherited Stocks Long-Term or Short-Term Capital Gains?

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Capital Gains Taxes Capital gains taxes are paid on investment profits. Basis Step Up When you inherit stock, the cost basis on the shares changes.

Tax Gain or Loss You do not have a taxable capital gain or loss until you sell your inherited shares and have a realized value from which to calculate whether you made a profit. Inherited Stock Considerations If the decedent's estate executor filed an estate tax return, use the value of shares reported on the tax return as your cost basis for the inherited stock. Stock Received from a Decedent FinancialWeb: Taxes on Inherited Stock.

About the Author Tim Plaehn has been writing financial, investment and trading articles and blogs since Recommended Articles How to Transfer Stock After Death How to Determine a Stock's Date of Death Value Do You Need to Pay Capital Gains Tax on Inherited Property If Sold? How to Track Mutual Funds From the Deceased. Related Articles Who Pays the Taxes on Probated Sold Stocks?

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The Tax Consequences of Sellling an Asset that is Inherited or Received as a Gift - FindLaw

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